Analysts at Danske Bank assessed yesteday’s decision by the Riksbank to leave the repo rate unchanged.
“The Riksbank argues that growth is strong and inflation is approaching 2%, but adds that a continued expansionary policy is needed to stabilise inflation around 2%”.
“The international economic backdrop has improved and setback risks have declined, but global inflationary pressures are deemed to still be subdued”.
“It seems the Riksbank is uncertain about the stability of inflation expectations given the long-term sub-target development. It again stresses the need for the SEK to appreciate only slowly. It points to the recent higher-than-expected inflation print as one reason for reducing the downside risk in the repo path”.
“However, it says that ‘this does not rule out repo rate cuts in the period ahead. As before, the Executive Board is prepared to implement further monetary policy easing if necessary to stabilise inflation and safeguard the inflation target”.
“All of the tools that the Riksbank has described earlier can, as always, be used if necessary’. Hence, there are no signs as far as we can see that the Riksbank is embarking on a more hawkish journey”.